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First Solar Inc. (FSLR - Analyst Report) has been selected by AGL Energy Limited as part of Australia’s Solar Flagships Program to design, construct and maintain two utility-scale solar photovoltaic (PV) power projects totaling 159 megawatts AC (MW).

The Australian Government’s Solar Flagships Program is one of a number of programs and market mechanisms providing unprecedented support for the development of a broad range and scale of solar energy projects and technologies in Australia. The Solar Flagships Program is offering funding to support the construction and demonstration of large-scale, grid connected solar (PV and thermal) power stations in Australia.

Under the program, AGL Energy will develop a 106 MWAC project in Nyngan and a 53 MWAC project in Broken Hill, both in New South Wales. First Solar will design and construct the integrated PV power plants, using its leading engineering, procurement and construction services and its advanced thin-film PV modules for both projects. First Solar will also maintain both projects for AGL Energy for their first five years of commercial operation. The electricity produced by the projects will be sold under power purchase agreements to AGL Hydro Partnership, a wholly owned subsidiary of AGL Energy.

The projects will be supported with funding provided by the federal government and the state government of New South Wales under separate funding agreements. On an annual basis, the projects will produce enough electricity to meet the needs of at least 30,000 Australian homes. The projects are expected to provide approximately 350 GWh of energy annually.

The projects are expected to create approximately 450 jobs at peak construction. Construction is expected to begin on both projects in 2014, with commercial operation in 2015. AGL Energy will be the majority owner of the project vehicle.

AGL Energy is one of Australia's leading integrated renewable energy firms. The company operates retail and merchant energy businesses, power generation assets and an upstream gas portfolio. It is Australia's largest private owner and operator of renewable energy assets and is looking to further expand this position by exploring a suite of low emission and renewable energy generation development opportunities.

First Solar, the largest stand-alone solar module manufacturer in terms of market capitalization, will benefit greatly from the steady economic recovery as well as favorable legislations supporting PV installations.

First Solar manufactures solar modules with an advanced semiconductor technology and is a premier provider of comprehensive PV system solutions. The company is delivering an economically and environmentally viable alternative to fossil fuel.

From raw material sourcing through end-of-life collection and recycling, First Solar is focused on creating value-driven renewable energy solutions that protect and enhance the environment.

Moreover, by virtue of its diversified revenue exposure, technological enhancements and cost minimization, the company has a distinct edge over its competitors. Through cadmium telluride-based solar modules, the company offers a differentiated technology versus its silicon-based peers.

However, First Solar’s short-term growth may be partially hampered by the volatile euro, apprehension over reduction in German subsidies, falling crystalline silicon prices and the module glut in the market. We are currently neutral on the Zacks #3 Rank (short-term Hold rating) stock. Over the longer run we also maintain our long-term Neutral recommendation on the stock. This is in line with other solar peers like Canadian Solar Inc. (CSIQ - Analyst Report) and JA Solar Holdings Co. Ltd. (JASO - Analyst Report).

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